[News] Reserve Bank of Australia Holds Cash Rates Steady, as Inflation Reduction Remains Top Priority

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The Reserve Bank of Australia (RBA) announced on August 6 that the cash rate target would remain unchanged at 4.35%, marking six consecutive months without adjustment. RBA Governor Michele Bullock stated that although inflation has eased from its 2022 peak, it remains above the 2-3% target range. The latest data shows that the quarterly core CPI for June stood at 3.9%, aligning with the RBA’s forecasts but marking the 11th consecutive quarter where inflation has exceeded the midpoint of the target range (2.5%).

Regarding the domestic economy, the RBA highlighted significant uncertainties. While the labor market has shown signs of slowing, both the labor force participation rate and unit labor costs remain elevated, posing a risk of a slow decline in inflation. The RBA currently forecasts that inflation will return to the target range by the second half of 2025, with the midpoint likely being reached in 2026.

Additionally, slow GDP growth, rising unemployment, and increasing pressures on businesses all point to a weakening of economic activities. This could result in household spending growing slower than expected, further contributing to prolonged low output and potential deterioration in the labor market.

As for the global economic outlook, while the softening of China’s economic prospects has already impacted commodity prices, geopolitical risks and the continued depreciation of the Australian dollar could negatively affect supply chains, thereby increasing inflationary pressures.

Given these uncertainties, the RBA emphasized that its primary objective remains to stabilize inflation within the target range. The central bank will continue to adjust its interest rate policies as necessary, based on economic data and risk assessments, to ensure the achievement of stable inflation and a robust labor market.

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(Photo Credit: Reserve Bank of Australia)